A Pre-feasibility Study for the Establishment of a Dairy ...®ارطة استثمارية... · Dairy products factory-AlTafilah Governorate 1 A Pre-feasibility Study for the Establishment

Dairy products factory-AlTafilah Governorate

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A Pre-feasibility Study for the Establishment of

a Dairy Products Factory

2017


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List of contacts

1. EXECUTIVE SUMMARY ............................................................................................. 7

KEY HIGHLIGHT OF JORDAN .................................................................................................................. 7

2. MATKET ANALYSIS ................................................................................................. 14

Project Description ..................................................................................................................................... 14

Raw Materials Requirements .................................................................................................................. 14

Project Objectives ...................................................................................................................................... 15

Proposed Products ..................................................................................................................................... 15

Target segments .......................................................................................................................................... 15

Market Size Analysis .................................................................................................................................. 15

Competitors Analysis ................................................................................................................................. 16

Price Analysis and Pricing Policy ............................................................................................................ 16

Market Share ............................................................................................................................................... 17

Projected Revenues ................................................................................................................................... 18

3. TECHNICAL ANALYSIS ............................................................................................ 19

Required Human Resources .................................................................................................................... 19

SitA analysis ................................................................................................................................................. 22

Departments of the Factory ..................................................................................................................... 22

Technical Requirements Analysis ........................................................................................................... 23

1.1.1 Land and construction ............................................................................................................... 23

Machinery and Equipment ...................................................................................................................... 24

Vehicles and Transportation .................................................................................................................... 24

4. FINANCIAL ANALYSIS ............................................................................................. 25

Assumptions ................................................................................................................................................ 26

Capital Expenditures .................................................................................................................................. 28

Operating Expenses ................................................................................................................................... 32

General and Administrative Expenses ................................................................................................... 33

Marketing Expenses ................................................................................................................................... 33

Human Resources ...................................................................................................................................... 33


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Depreciations .............................................................................................................................................. 35

Loan ............................................................................................................................................................... 36

Income Statement ...................................................................................................................................... 36

Expected Cashflows Statement ............................................................................................................... 38

Expected Balance Sheet ............................................................................................................................ 39

Feasibility Indicators .................................................................................................................................. 41

Sensitivity Analysis ..................................................................................................................................... 42


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List of tables

Table 1 economical indicators .............................................................................................................................. 7

Table 2 Population Distribution according to Age Group ............................................................................. 9

Table 3 Income Tax and Exemptions ............................................................................................................... 14

Table 4 raw material required ........................................................................................................................... 14

Table 5 the proposed products ......................................................................................................................... 15

Table 6 rate of Imports and exports of dairy 2011-2015 ............................................................................ 16

Table 7Factory product prices compared with the markets (JD) ............................................................... 17

Table 8 average annual consumption per capita of dairy ........................................................................... 17

Table 9 projected revenues ................................................................................................................................ 18

Table 10 Analysis of the productive capacity of the plant .......................................................................... 19

Table 11 the required labor for the project ..................................................................................................... 19

Table 12 the required land for the project ...................................................................................................... 23

Table 13 Required Construction Work ............................................................................................................ 24

Table 14 Machinery and Equipment ................................................................................................................ 24

Table 15 Required Vehicles and Trasportation ............................................................................................. 24

Table 16 General Assumptions .......................................................................................................................... 26

Table 17 Annual Growth Rates Assumptions ................................................................................................ 26

Table 18 Expenses Assumptions ....................................................................................................................... 26

Table 19 Income Tax Assumptions ................................................................................................................... 27

Table 20 Weighted Average Cost of Capital ................................................................................................... 27

Table 21 Land Capital Expenditure................................................................................................................... 28

Table 22Construction Work Capital Expenditure ......................................................................................... 28

Table 23 machinery and equipments Work Capital Expenditure ............................................................. 29

Table 24 Transporation and Vehicles Capex .................................................................................................. 29

Table 25 Pre Operating Expenses ..................................................................................................................... 29

Table 26 Working Capital ................................................................................................................................... 30

Table 27 Expenses Summary ............................................................................................................................. 30

Table 28 Sources of Funding .............................................................................................................................. 30

Table 29 Operating Expenses ............................................................................................................................ 32

Table 30 General and Administrative Expenses ............................................................................................ 33

Table 31 Marketing Expenses ............................................................................................................................ 33


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Table 32 Expected Annual Salaries and Wages (2027-2018) .................................................................... 34

Table 33 Capex and Depreciation Expenses .................................................................................................. 35

Table 34 Depreciations and Additions on Construction Works ................................................................ 35

Table 35 Loan Details .......................................................................................................................................... 36

Table 36 Income Statement ................................................................................................................................ 37

Table 37 Expected Cashflows ............................................................................................................................ 38

Table 38 Expected Balance Sheet ...................................................................................................................... 40

Table 39 Free Net Cash flows Table ................................................................................................................. 41

Table 40 Payback Period ..................................................................................................................................... 42

Table 41 Financial Analysis Results .................................................................................................................. 42

Table 42 Sensitivity Analysis .............................................................................................................................. 43


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List of shapes

Figure 1 Population of Jordan .............................................................................................................................. 8

Figure 2 Sectors Contibution to Jordan’s Economy ...................................................................................... 10


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1. Executive Summary

The project aims to establish a factory for the manufacturing of milk and dairy products in AlTafilah

governorate, and this project is a unique project on the scale of the governorate especially as it

suffers from a shortage of those products.

The project, if established, will raise the level of the industrial sector in the governorate and

encourage investment in it. Based on the proposed market share and the prices that we will be

presenting later in detail, which were presented by the proposed project, the expected revenues

amounted to 3,246,336 JD during the first year of the project and gradually increase to 5,140,032

JD during the tenth year. The period of capital recovery is 5 years with an internal rate of return

equal to 26.13%, in addition to providing 35 jobs.

The following table shows the financial indicators of the project:

Table 1 economical indicators

Value Indicator

212,21,,2 Total Investment Cost (Jordan Dinars)

21.,2% Internal Rate of Return (IRR)

2 Pay-Back Period (Years)

21,,71122 Net Present Value (Jordan Dinars)

22 jobs opportunities that provided by the project

,,1,2,12,, Expectations annual revenue (for 10 years)

2,1,2212,, Total operating costs (for 10 years)

21,,,172, Gross profit (for 10 years)

Key Highlight of Jordan

Jordan Hashemite Kingdom area is 89342 Kilometers with a population exceed 9.8 Millions

distributed among 12 Governorates.

Jordan is bounded by Saudi Arabia, Iraq, Syria and Palestine from the South, East, North and west

respectively. Jordan climate is mostly arid desert with rainy season between November to April

Months.


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Jordan is a free market economy, ranked as the fifth freest economy in the MENA region in the

Index of Economic Freedom. Its free market economy enjoys strong partnerships amongst its

neighboring country as well as Europe and the USA. Jordan is a signatory of several bilateral and

multilateral trade agreements such as (Free Trade Agreement with the US and the EU, a Free Trade

Agreement with the EFTA states, an FTA with Singapore, A member of the Greater Arab Free Trade

Agreement (GAFTA) and a signatory of the Aghadir Agreement. Looking at the range of countries

these agreements cover and facilitate trade between, one is confident to say that Jordan has

business gateways and partnerships across the globe.

Population Overview

Based on the latest surveys done by Department of Statistics (DOS) in 2017, total number of

population has reached around 9.814.995 with an increase rate of 2.88% from 2016 year, figure

below summarizes the population distribution among the kingdom governorates.

Figure 1 Population of Jordan

of Statistics (DOS), 2015

Moreover, and based on the latest survey conducted by (DOS) which related to population

nationality distribution over the governorates, it was found that total Non-Jordanian residents

constitutes around 30% of the total population. Half of these are Syrians (1.3 Million) concentrated

mainly in Amman Capital (436 Thousand) then Irbid (343 Thousand), Mafraq at 208 Thousand

and Zarqa at 175 Thousand.


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Jordan prides itself in its youthful population with 35% of ages below 15 years old and only 4%

with ages above 65 years old. Table below summarizes population distribution of Jordanians

according to Age Group:

Table 2 Population Distribution according to Age Group

Females Males Population % Age Group

%18.2 %19.2 %35.04 0-14 Years

%28.6 %30.7 %61.02 15-64 Years

%1.6 %1.6 %3.94 More than 65 Years

Department of Statistics (DOS), 2015.

Overiew of Jordan Economy

Classified as an upper middle economy by the World Bank and as a country of High Human

Development by the UNDP, Jordan is an important financial power in the Middle East. Its small

market witnessed growth in the last two decades since King Abdullah II accessed the throne.

Jordan’s GNI per capita has increased in the last four years due to the basket of economic reforms

that were enacted in the recent decade such as (the new Income Tax Law, Public Private

Partnership Law and Investment Law). These laws aim to encourage the participation of the private

sector in the Kingdom’s economic development and provide an enabling legislative environment

for current and new investment opportunities.

The Jordanian economy is overwhelmingly services oriented and its contribution in the GDP is

68.1%. The contribution of the industrial sector is 22.4%, the construction sector is 4.2% and the

agricultural sector is 2.9%. These contributions are aimed to increase to (27.4%), (5.8%) and

(3.4%) respectively and that of the service sector is due to decrease according to Jordan 2025

vision.


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70%

23%

4% 3%

Service sector

Indusrty sector

construction sector

Agriculture sector

Figure 2 Sectors Contibution to Jordan’s Economy

Jordan’s exports include variety of textiles, potassium, phosphates, fertilizers, vegetables and

pharmaceutical products. While it’s main imports are crude and refined petroleum. Distinguished

by its strategic location, on the crossroads between Asia, Africa and Europe with strong connections

to the Levant and the GCC, Jordan has a regional market of interest that represents US$3.8 trillion

market and compromising 380 million consumers.

Jordan infrastructure ranks comparatively well (38th out of 148 comparable economies), with an

extensive 8000 KM road network connecting Jordan domestically and externally The new Queen

Alia International Airport and the Port of Aqaba are the major gateways to the international market.

In addition to some mega projects such as the Red- Dead Sea Canal and the national railway

network that will be developed to position Jordan as a hub for regional commerce.

Jordan banking system is quite sophisticated, resilient and in compliance with international

standards, making it very attractive and trustworthy to investors. This is reflected in the fact that

50% of equity in licensed banks in Jordan is held by non-Jordanians, and non residents’ deposits in

Jordanian banks witnessed a steady growth of 19.2%.

Moreover, realizing the value of MSMEs to drive economic growth, the government has developed

the national Strategy for the encouragement of entrepreneurship and the development of micro

small and medium sized enterprises for 2015-2019. This shows the commitment of the Jordan


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government to enhance the private sector development and leveraging the country’s strong human

capital.

Jordan prides itself in its youthful population. It’s the country most valuable capital. A tech savvy

well educated and trained workforce attracts a lot of investors to Jordan. More than 20.4% of

Jordan’s GDP is dedicated to the education and capacity building for the labor force, this has

resulted in securing a 91% literacy rate and enabled Jordanians to be among most hired and

qualified middle-eastern workforce.

Such solid, diverse and resilient characteristics of the Jordanian economy and investment scene

position Jordan as a competitive investment destination.

Major Economic Indicators

GDP Growth

The Jordanian economy slowed and reached 2.4 percent in 2015 compared to growth rate of 3.1 in

2014 and similar to MENA growth rates.

The growth also slowed for trade, restaurants and hotels; manufacturing; transport; and electricity

and water. Meanwhile, finance, insurance, and business services advanced at a faster pace.

Inflation rate

Inflation rate decreased to 0.9 in 2015 after 2% decline in the previous year. Inflation Rate in Jordan averaged 3.1 percent from 2011 until 2015.

Unemployment

The unemployment rate in Jordan was recorded at 13 percent in 2015, comparing to 11.9 percent a year earlier. This increase due to the current instability in the labor market structure as well as high competition from low cost foreign labors especially from Syria.

External Sector

A number of risks manifested in 2015, the closure of land trade routes with Syria and Iraq and the

deepening instability in the region adversely impacted many external sector indicators such as

trade, tourism and direct Investment.


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Moreover, loans disbursements increased by JD 545.3 million, due to the use of the International

and Arab Monetary Funds (IMF and AMF) credit facilities. As an outcome of these developments,

the overall balance of the balance of payments registered a surplus of JD 328.7 million in 2015,

compared with a surplus of JD 1,550.7 million in 2014.

Further, net international investment position (IIP) witnessed an increase in the Kingdom’s net

obligations to abroad; to reach JD 24,357.5 million, compared to a net obligation of JD 22,578.8

million at the end of 2014 as a result of the increase in the stock of external financial assets and

liabilities of all resident economic sectors to reach JD 18,657.9 million and JD 43,015.5 million;

respectively.

External Debt in Jordan increased to 9390.50 JOD Million in 2015 from 8030.10 JOD Million in

2014. External Debt in Jordan averaged 5433.67 JOD Million from 1988 until 2015, reaching an all

time high of 9390.50 JOD Million in 2015 and a record low of 3640.20 JOD Million in 2008.

Investment Climate in Jordan

Investment in Jordan is considered as one of the vital sources to boost the economy considering

that Jordan's economy is among the smallest in the Middle East, with insufficient supplies of water,

oil, and other natural resources, underlying the government's heavy reliance on foreign assistance.

The country’s location, supported by myriad free trade agreements (FTAs) offering access to 1.5bn

consumers, enables the kingdom to be a strategic trade route to many of its neighboring countries

and regions.

Jordan aspires to create a competitive investment destination capitalizing on its many advantages

mentioned above. The government focused its efforts to implement significant advances in

structural and legal reform. These efforts are represented in the new Investment Law of 2014, the

tax law, in addition to other endeavors related to providing greater access to credit for MSMEs, and

by providing greater investment incentives to specific priority sectors identified by the new

Investment law and the Jordan 2025 vision.

Furthermore, in it endeavor to enhance the business environment, several geographically industrial

states were created across the kingdom. These range in type to include (industrial estates, free

zones and special economic zones). Under the new Investment Law, these zones are given a

number of incentives that include a tax rate of 0% on exports, sales tax, import duties, social service

tax, dividends tax and a 5% income tax from all economic and manufacturing activities undertaken

in the development zones. As for the investments in Free Zones, they enjoy Exemptions from


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customs duties, income tax exemptions and exemptions from land and building taxes among

others. Both development and free zones also enjoy facilitations regarding visa and residency

permits for investors and workers in addition to Repatriation of capital and profits in a convertible

currency. Such estates have succeeded in attracting relatively large amounts of FDI to Jordan.

Key National Invesment Priorities:

Jordan Investment commission worked on taking a leading role in the application of government

policies to promote and attract domestic and foreign investments and create an investment

environment that stimulates economic performance through investment promotion strategy

launched in 2016

Jordan investment commission aims to:

Regulating the special provisions governing Development Zones and Free Zones in the

Kingdom and developing them placing them in service of the national economy as well as

monitoring their functioning.

Developing plan and programs to stimulate domestic and foreign investments.

Establishing trade centers and organizing exhibitions as well as opening markets and

organizing trade missions in order to promote national products, in addition to marketing

and development of national exports and encouraging investment.

Taking appropriate decisions related to private or public institutions to improve Investors’

confidence in Jordan’s investment environment.

Investment Climate in Al-Tafielh:

Under the provisions of fifth article of the investment law No. 30 of 2014 and Income tax

regulations in the less developed areas, the reduction of the income tax system on the investment

projects are clarified in the table below:


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Table 3 Income Tax and Exemptions

Less Developed Areas Within the Development Zone or Free Zone

Income Tax is 20%

As per Investment Law categorization, Irbid

is classified in Class (B) where investors

enjoys 80% exemption on Income tax for 20

years, where net income tax after reduction

should not be less than 5%.

Income Tax is 5%

2. Matket analysis

Project Description

The project aims to establish a plant in AlTafilah governorate to produce milk and dairy products.

The idea of establishing the project is considered a good idea especially, when such products are

widely sold in markets and supermarkets because of their nutritional benefits and are

recommended for adults and young people and can be easily marketed.

The production capacity of the plant is estimated to be about 800 tons / year of fresh pasteurized

milk used for manufacturing various dairy products such as: milk, yogurt, white cheese, Labaneh

and Jameed.

Raw Materials Requirements

The required raw materials are summarized in the table below:

Table 4 raw material required

Cost (JD) Measuring unit Raw materials

,.27 L Fresh raw milk 0.36 Kg Sugar

,.17 Kg Salt

,.13 G Rennet

0.51 Kg Calcium chloride

10.68 Kg Stabilizers

2,.2 Kg Allowed artificial colors

,7.,, 1000 package Plastic containers

,,.,, 100, cover Aluminum covers

,,, 1000 one liter package Cartoon paper

22.,, bags 1000 Plastic bags

,.2, box Plastic boxes


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Project Objectives

The objectives of the project are summarized as follows:

• Encouraging investment in the industrial sector in the governorate.

• Supplying the local market with essential dairy products.

• Providing job opportunities and improving the living and social standards of the workers in the

project.

• Achieving financial return for the owners.

Proposed Products

The proposed project will establish a factory for the manufacturing of milk and dairy products and

distribute them to the markets within the governorate to cover the demand of dairy products,

especially as it suffers from a shortage of those products because of their geographical distance

from food distribution companies. In addition, it will serve the markets of other southern

governorates.

The plant is expected to produce several types of dairy products, and the following table illustrates

those products:

Table 5 the proposed products

products

Pasteurized milk

Jameed

Yogurt

Labneh

White cheese

Target segments

The project mainly targets local markets within the governorate to provide them with dairy

products, and also targets the families and residents of the governorate by providing them with job

opportunities, as well as supplying dairy products to southern governorates.

Market Size Analysis


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Based on the recorded economic statistics, the total production of the dairy industry in the

Kingdom reached 537.52 tons during the seven months from January to July 2016. The amount of

imported milk products for the year 2015 reached (6,487 tons), while the quantity of exports of the

same product reached to (979 tons), this means that the rate of imports is higher than the rate of

exports, which reinforces the idea of establishing factories and support the local industrial sector.

The following table shows the Kingdom's import and export rate for dairy products from 2011-

2015.

Table 6 rate of Imports and exports of dairy 2011-2015

Years Value of

imports

(MJD)

The amount

of imports

(Ton)

National

exports

(MJD)

The amount

of exports

(Ton)

Value of

exports

(MJD)

Value of

trade deficit

(JD)

2,,2 ,,12271,,2 11,27 1,946,699 ,7, 2,464,081 -7,773,361

-7,773,361

-7,773,361

2,,, 12,855,964

12,855,964

7122, 1,281,378 22, 1,314,364 -11,541,600

2013 10,078,444 112,2 2,173,927 ,1722 2,397,822 -7,680,622

2,,2 4,613,250 21227 3,140,380 21,7, 3,483,745 -1,129,505

2,,, 9,912,335 ,1,,, 1,538,972 ,121, 1,875,362 -8,036,973

Average 9353934,9 93999 232193291 13513 233293295 932323412-

Department of Statistics http://www.dos.gov.jo/dos_home_a/main/linked-html/external_trade.htm

Competitors Analysis

Based on market studies and analysis by the team, there are direct and indirect competitors:

Direct competitors, Hamouda Food Industries Company, where it contains an official agent within

the governorate and distributes its products to commercial markets.

Indirect competitors such as Baladna Food Industries and Al-Mazra'a for food processing. They

distribute their products from the capital to the governorate within a specific distribution

mechanism, in addition to other food companies such as Al-Youm and Taiba Food Industries.

Price Analysis and Pricing Policy

Pricing policy is an important component of the marketing, which determines the project's ability

to attract targeted segmants. The prices of dairy products are fairly stable, and the following table

shows the prices of the factory's products compared to their prices in the local markets:

http://www.dos.gov.jo/dos_home_a/main/linked-html/external_trade.htm


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Table 9 Factory product prices compared with the markets (JD)

Products Units Market price Factory price

Pasteurized milk L ,-,.22 , Al-Jameed Kg 2,-21 22 Yoghurt Kg ,.1,-,.72 ,.7, Labneh Kg 2.2,-2 2 White cheese Kg ,-1 2

Market Share

According to the general statistics, the population of AlTafilah governorate is (96,291), and has a

population density of 43.6 persons / km2. The following table shows the average annual

consumption per capita in AlTafilah governorate compared with the Kingdom for dairy products

for 2013:

Table 8 average annual consumption per capita of dairy

Products Consumption per person / year

AlTafilah Kingdom

Pasteurized milk ,.12 ,.22

Fresh milk ,.,2 ,.,2

Yoghurt (Kg) ,.2, ,2.,,

Normal buttermilk ,.,, 2.,1

Labneh (Kg) 2.,2 2.,,

White cheese ,.,, ,.7,

Department of statistics - file:///C:/Users/n/Downloads/2013%207-1.pdf

Based on the above, it was found that the governorate consumption rate of the products to be

manufactured is (719) tons / year, and for the Kingdom amounted to 235,560 tons / year.


Projected Revenues

Projected Annual Revenues for the Project

Based on the studies and assumptions of the Jordanian market size in the amount of consumption of milk and the analysis of the pricing policy of

factory products, it was found that the revenue of the factory in the first year of its establishment is (3,246,336) JD to reach the tenth year of the

study to (5,140,032) JD. The following table shows the revenues of the plant within ten years from the beginning of the project:

Table 9 projected revenues

Price assumption 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

The production rate of full production

capacity

60% 65% 70% 75% 75% 80% 80% 85% 90% 95% The selling price of pasteurized milk

(L\JD)

1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00

The selling price of fresh Jameed

(Kg\JD)

25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00

The selling price of yoghurt (Kg\JD) 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70

The selling proce of Labneh (Kg\JD) 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

The selling price of white cheese

(Kg\JD)

5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00

Revenues of pasteurized milk 92736 100464 108192 115920 115920 123648 123648 131376 139104 146832

Revenues of Jameed 2318400 251160

0

270480

0

289800

0

289800

0

309120

0

309120

0

328440

0

347760

0

367080

0 Revenues of yoghurt 67200 72800 78400 84000 84000 89600 89600 95200 100800 106400

Revenues of Labenh 288000 312000 336000 360000 360000 384000 384000 408000 432000 456000

Revenues of white cheese 480000 520000 560000 600000 600000 640000 640000 680000 720000 760000

Total revenues 3246336 351686

4

378739

2

405792

0

405792

0

432844

8

432844

8

459897

6

486950

4

514003

2


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The following table shows the analysis of the production capacity of the plant, where the total

capacity was imposed about (800) tons / year, and the proportion of each product is 20% of the

total production capacity.

Table 12 Analysis of the productive capacity of the plant

Production capacity

Annual production capacity (Kg) 800000

Production rate of pasteurized milk 20%

Production rate of Jameed 20%

Production rate of yoghurt 20%

Production rate of Labaneh 20%

Production rate of white cheese 20%

The convert coefficient (kg to liter) 0.966

3. Technical Analysis

The study aims to develop the technical specifications of the project, based on the results of the

market study, in addition to evaluating and reviewing investment and operational costs. The

technical study of the project includes an explanation and a general description of the aspects of

the project along with its components, in addition to the constructional and operational

requirements of the project.

Required Human Resources

This project requires a factory manager who oversees all operational matters in the factory, as well

as a financial manager to develop financial management plans and regulations, an accountant who

manages the financial affairs of the factory, as well as production line technicians and cleaners to

keep all facilities clean.

Table 11 the required labor for the project

Job title No.

General Manager ,

Factory manager ,


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Job title No.

Financial Manager ,

Quality manager ,

Human resources manager ,

Quality auditors 2

Accountant 2

Secretaries ,

Human resources staff 2

Guard 2

Total of indirect staff 15

Production line technicians ,,

Logistics Manager ,

Logistics staff 2

Maintenance technicians 2

Driver 2

Total of direct staff 21

Total 35

Job Description:

General Manager: perform all the tasks and responsibilities of the general manager, and

active participation in the identification and formulation of objectives, as well as planning

and organizing workflow facility to ensure the achievement of specific objectives.

Factory manager: Is working solo and within his authority, while his hiring by the person

who owns the project. Also is propose policies and action plans and to represent the

factory and workflow planning and management at the plant, following up the

implementation of plans and programmes in accordance with determined policies and

objectives of the plant optimally to achieve the interests of employers, and overseeing the

management of administrative and financial affairs in accordance with prescribed

instructions in this regard, managing subordinates, develop their skills, develop procedures

and ensure occupational safety and health requirements.


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Financial manager: Define the organizational objectives, plan, organize and follows up

on the implementation of the financial management plans according to the internal

regulations of the factory and propose the appropriate annual budget for the plant within.

Quality manager: Planning and organizating the work in accordance with ISO 9001 -

2015 and effective participating in the identification and formulation of objectives and

performance of all tasks.

Human resources manager: Develop procedures, policies and plans for the recruitment

of employees, and follow-up on all with workers through services and administrative

affairs and the provision and improvement of working methods.

Quality auditors: Check the effectiveness of administrative performance and work

procedures in accordance with the legislations in force.

Accountant: follows-up financial matters and financial audit, and submit annual reports

of the financial situation.

Secretary: Receive the factory's correspondences and transactions and submit them to the

factory manager, and also support the administrative staff.

Production line officer: Following-up and monitoring of the production process

according to pre-set plans.

Logistics Manager: Planning, managing and supervising the plans, policies and

procedures of the logistics services and providing the necessary consultations to support

and implement the agreed strategic objectives, in addition to developing logistics services,

which includes maintenance and services.

Maintenance technician: implement actions and activities of electrical and mechanical

maintenance, and follow up on the implementation of plans and programs planned in

order to ensure the continuity of the production process and quality at full capacity with

the lowest possible cost, and ensure the availability of spare parts, and the preparation of

technical reports.

Driver: Responsible for the transportion of products and distributing them to the markets.

Security: Implement the approved security instructions to maintain the security system in

the factory.


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Site Analysis

It is proposed that the plant should be located on a land outside the organization on an area of

10,000 square meters and away from any source of microbial contamination, toxins or unpleasant

odors, such as the livestock market, oil refineries, open sewage or others, in addition to the

availability of water in appropriate quantities and quality If possible, with a possible disposal of

wastes. The following points should be considered:

Taking into account future expansion possibilities.

Isolate management sections and laboratories from producion sections, also should be in

separate buildings and production lines from each other with wide dividers

Placing the tanks of raw milk in a high place to avoid frequent pumping.

Building warehouses and stores at the level of the production lines to facilitate the entry of

materials and finished products.

Working conditions should be good within the factory, such as lighting, heating,

ventilation, cleaning and other.

Departments of the Factory

Dairy plant should consist of the following:

– Department of receiving raw milk: In this department, the acidity of the milk is

determined by which if the milk is accepted or rejected, milk is then weighted, refrigerated

and stored in large tanks until processing.

– Production Department: It is the largest department in the factory, consisting of several

production lines.

– Storage Department consists of two parts:

The First, consists of several large refrigerated rooms to store ready-made dairy

products after they are manufactured until they are marketed.

The second, consists of several non-refrigerated warehouses for storing auxiliary

materials in production, such as packaging materials from sterile milk bottles,

plastic or metal packaging, and other production requirements.


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– Laboratories: equipped with all the necessary equipment, tools and materials for checking

and evaluating raw milk, as well as finished products, their quality and their conformity

with the standard specifications of each product.

– Management and Marketing Department: includes the administrative offices, public

facilities, restaurants and bathrooms.

– Water treatment Department: In order to become usable in the plant, by following a

series of mechanical and chemical processes in the following order:

1. Sedimentation and filtration to dispose of organic matter related to water.

2. Remove the water shortage resulting from the presence of calcium carbonate, which

causes many problems, the most important of which is the deposition of calcareous

layer on the surface of the heating panels, which reduces thermal conductivity of

these panels, and the water shortage causes the increase in the amount of washing.

3. Sterilization of chlorinated water to eliminate pathogenic microorganisms.

The supply of hot water and steam necessary for manufacturing and washing operations, through a

complete heating circuit, which includes the boiler and its necessary accessories.

- Provision of cold water, necessary for dairy products cooling after being manufactured, or to cool

the milk in a full cooling cycle after sterilization.

Technical Requirements Analysis

1.1.1 Land and construction

The project will be constructed on an area of 10,000 m2. The following table shows the required

land:

Table 12 the required land for the project

Area sq.m

2م

Land

10,000 The required land

The required construction works for the project are represented as follows:


24

Table 13 Required Construction Work

Construction Work Area (sq.m)

Hengar 21,,,

Paving ,2,

Design 21,,,

Machinery and Equipment

The following table provides the machinery and equipment needed for the project:

Table 14 Machinery and Equipment

Machinery and equipment Quantity

Cooling tanks 3 Dairy production line 1

Milk production line 1

Pasteurization machine 3

Filtering and purifying machine 1

Boiler 2

Laboratory devices -

Processing equipment 1

Generator 1

Heatsink equipment -

Oven 1

Packaging machine 1

Tubes -

Stainless steel cabinets and tables ,

Sorting and blending machine 1

Vehicles and Transportation

The following table shows a list of vehicles and means of transportion required for the project:

Table 15 Required Vehicles and Trasportation

Vehicles and Transportation Quantity

Refrigerated truck 3-ton capacity 5

Pick-ups 3


25

4. Financial Analysis

The Financial Part illustrates all the assumptions which were used when we have developed the

study including project expenses related to capital expenditures, operating expenses ( Fixed and

Variable costs) followed by illustrating project revenues.

Assumptions

Calculation Assumptions:

The weighted average cost of capital used in the study is 12.26% as it was calculated

considering risk free and debt Interest rates as well as Market risk premiums to consider

alternative opportunity costs for investor.

Icome tax on the net project income is 5 % during the life time of the project.

Project working capital has been estimated and added to project cash outflows at the

beginning of the project and annual increase in working capital has been also estimated

and added to the operating expenses then net working capital has been added to total cash

inflows at the end of project lifetime.

The time span for the financial study is 10 years starting from 2018, where annual increase

rates have been estimated as per the tables below:


26

Assumptions

Table 16 General Assumptions

General Information

All Financial Numbers (Currency) Jordan Dinars

Financial Study Time Span (Years)

0

,,

Expected Project First Operating Year 2,,2

Last Year in the Financial Study 2,27

Table 1 Currency Exchange Rates

Exchange Rates Jordan Dinars

American Dollar ,.7,2

Euro ,.71,

Table 17 Annual Growth Rates Assumptions

Annual Growth Rates Average

Annual Population Growth Rate 2.20%

Annual Sales Price Increase Rate 3.00%

Annual Expenses Increase Rate 3.00%

Annual Increase Rate in Employees Salaries 4.1% (, ) and (2) Source: Inflation Rates, Central Bank of Jordan

(3) Source: Social Security

Table 18 Expenses Assumptions

Expenses Assumptions

Raw Materials and Packaging from Total Revenues %2,

Utilities Expenses from Total Revenues %,,

Maintenance Expenses from Total Revenues %,

Depreciation Expenses from Total Revenues %,

Insurance Expenses from Total Assets Value %,.2

Marketing Expenses from Total Revenues %2


27

Table 19 Income Tax Assumptions

Income Tax Assumptions Value

Average Income Tax in Jordan (,) %2,

Income Tax Deduction (2) %2,

Income Tax after Deduction 5%

Compulsary Reserve Percentage (2) 10%

Other Assumptions Value

Annual Monthly Salaries have been calculated after multiplying monthly salaries by: (,) 16

Risk Premuim

Risk Free Rate of Return (,) 6.50%

Return to Debt Maturity (2) 9.48%

Market Risk Premuim (2) 10.12%

Income Tax Rate 5%

Beta (,) 0.89

Growth Rate 4.00% (, ) Source :Damodaran's Country Default Spreads and Risk Premiums Report

(2 ) Source :Central Bank of Jordan

(2 ) Source :Damodaran's Country Default Spreads and Risk Premiums Report

(, ) Source :Damodoran Beta By Sector, , pages.stern.nyu.edu

Table 20 Weighted Average Cost of Capital

Weighted Average Cost of Capital

Average Return on Risk Free Investment 1.2,%

Return to Debt Maturity ,.,2%

Market Risk Premuim ,,.,2%

Income Tax Rate 2%

Bets ,.,,

Equity ,1,,,12,2

Loans Value ,12,712,2

Loans

Cost of Borrowing before Tax ,.,2%

Cost of Borrowing After Tax ,.,,%

Loans Value ,12,712,2


28

Loans Percentage 1,%

Equity

Cost of Equity ,1.,%

Equity Value ,1,,,12,2

Equety Percentage ,,%

Gross

Project Value 212,21,,2

Weighted Average Cost of Capital ,2.,2%

Capital Expenditures

The estimated cost of the project is 2,512,005 JD and it covers land costs, construction works,

machinery and equipment, furniture, pre-operating expenses and working capital. The following

tables summarize the details of these expenses:

Table 21 Land Capital Expenditure

Land Cost (Jordan Dinar/Meters Square) Area (m2) Cost

إلاجمالية

/ دينار

أردني

Required Land 2 ,,1,,, 2,1,,,

Gross Cost 523222

Table 22Construction Work Capital Expenditure

Construction Works Cost (JOD per Squared

Meters)

Area

(Squared Meters)

Gross

Cost /

Jordan

Dinar

Hunger 100 21,,, 200,000

paving 12 ,2, 1,800

Design and blueprints 7 21,,, 14,000

Other Works 21,580

Total 237,380


29

Table 23 machinery and equipments Work Capital Expenditure

Machinery and equipments No. Cost (JOD per unit) Gross cost

Cooling tanks 3 10,500 31,500

Dairy production line 1 63,000 63,000

Milk production line 1 81,700 81,700

Pasteurization machine 3 8,400 25,200

Filtering and purifying machine 1 35,000 35,000

Boiler 2 24,500 49,000

Laboratory devices 2 2,1,,, 40,000

Processing equipment 1 28,500 28,500

Generator 1 5,000 5,000

Heatsink equipment , 21,,, 3,000

Oven 1 2,000 2,000

Packaging machine 1 400 400

Tubes - 21,,, 3,000

Stainless steel cabinets and tables - - 2,900

Sorting and blending machine 1 ,1,,, 4,000

Other 4,000

Total 378,200

2

Table 24 Transporation and Vehicles Capex

Description No. Cost (JOD per

unit)

Gross cost

Refrigerated truck 3-ton capacity 2 2712,, ,211,,, Pick-ups 2 221,,, 7,12,,

Total , 2293222

Table 25 Pre Operating Expenses

Pre-operating expenses Estimated cost (JD(

Governmental fees 212,,

Transportation 212,,

Marketing 21,,,

Training ,122,

Total 113,52


30

The initial working capital reflects the project's amounts needed to cover all the expenses during

operation until the project starts generating income, the following table shows the components

of the initial working capital:

Table 26 Working Capital

Working Capital No. of

Months

% Estimated Cost

(JD) Operating expenses 6 2,% ,1,22112,

General and administrative expenses 6 2,% ,21,72

Marketing expenses 6 2,% 2,1,22

Indirect Salaries 6 2,% ,,12,,

Total 133,23211

Table 27 Expenses Summary

Capital expenditure summary Cost (JD) Contingency Cost (JD) %

Land 50,000 10% 55,000 2.2%

Construction works 237,380 10% 261,118 ,,.,%

Machinery &Equipment 378,200 10% 416,020 ,1.1%

Furniture 18,000 10% 19,800 ,.2%

Vehicles 206,200 10% 226,820 ,.,%

Pre-Operating Expenses 11,850 10% 13,035 ,.2%

Working capital 1,382,011 10% 1,520,212 1,.2%

Total (JD) 2,283,641 2,512,005 100%

Sources of Funding

The financing structure of the project consists of loans and Equity. The investment cost of this

project is estimated at (212,21,,2) JD, where 1,% of the project will be financed through loans

(,12,712,2) JD, and the remaining (40%) through (Equity) with (,1,,,12,2) JD. The following

table summarizes the general structure of the required financing:

Table 28 Sources of Funding

Funding Sources Amount Percentage

Equity

(Self Financing)

1,004,802 ,,%

Loans 1,507,203 1,%

Total 235123225 122%


31

Use of Fund Falue Ratio

Capital Expenditures 978,758 22.,1%

Pre-Operating Expenses 13,035 ,.22%

Working Capital 1,520,212 1,.22%

Total 235123225 122.22%


32

Operating Expenses

The following table sumarizes the expected operating expenses for the proposed project (2018-2027):

Table 29 Operating Expenses

Description 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Raw Materials and Packaging from Revenues ,11221,12 ,17221,22 ,12,211,1 21,221,1, 21,221,1, 21,1,122, 21,1,122, 212,,1,22 21,2,1722 2127,1,,1

Utilities from Revenues 22,112, 22,1121 272172, ,,217,2 ,,217,2 ,2212,2 ,2212,2 ,2,12,2 ,211,2, 2,,1,,2

Maintenance from Revenues 221,12 221,1, 27127, ,,127, ,,127, ,2122, ,2122, ,21,,, ,211,2 2,1,,,

Disposables from Revenues 221,12 221,1, 27127, ,,127, ,,127, ,2122, ,2122, ,21,,, ,211,2 2,1,,,

Direct Salaries ,2711,, ,,212,2 ,,,1,,2 ,221222 ,1,12,2 ,1212,2 ,721,,2 ,2212,, ,2,171, ,,712,,

Others 2,21,22 222127, 2,,172, 2171,,, 217172, 2221,21 2221272 2,21211 22,1221 2221,27

Total 2,365,361 2,556,067 2,747,027 2,938,252 2,945,253 3,137,041 3,144,628 3,337,026 3,529,747 3,722,806


33

General and Administrative Expenses

The following table sumarizes the expected general and administrative expenses for the proposed project (2018-2027)

Table 30 General and Administrative Expenses

Description 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Telecom 21,,, 21,72 212,1 21122 217,, 21722 21211 21,22 21,,, 21,2, Hospitality ,12,, ,1221 ,1272 ,12,, ,122, ,12,, ,1,22 ,1,71 ,122, ,1211

Staionary and Printing ,12,, ,1221 ,1272 ,12,, ,122, ,12,, ,1,22 ,1,71 ,122, ,1211

Transportaton 211,, 217,2 212,, 21,2, ,1,22 ,1,72 ,12,, ,1,22 ,121, ,11,7

Rent 2,1,,, 2,11,, 2,12,2 2,1222 2212,, 221,22 22122, 2,12,7 221222 211,,2

Training ,12,, ,1221 ,1272 ,12,, ,122, ,12,, ,1,22 ,1,71 ,122, ,1211

Insurance ,12,, 21,,, 21,,2 212,2 212,2 21172 212,2 11,,, 11,,, 11222

Miscellaneous 21,,, 21222 2112, 2171, 21222 21,,, ,1,,, ,12,2 ,127, ,12,,

Total 37,943 39,081 40,254 41,462 42,705 43,987 45,306 46,665 48,065 49,507

Marketing Expenses

Table 31 Marketing Expenses

Description 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Marketing Expenses 162,317 175,843 189,370 202,896 202,896 216,422 216,422 229,949 243,475 257,002

Human Resources

The total annual salaries and monthly wages has been estimated on 16 months for the purpose of considering annual increments on salaries as well as payments

related to social security and health insurance,… etc.


34

The following table summerizes the expected annual salaries and wages, considering annual increment on salaries as per the income statement:

Table 32 Expected Annual Salaries and Wages (2027-2018)

Job Title No. Monthly salary (JD) Total monthly

salaries

Total annual wages )دينار(

General Manager , 21,,, 21,,, ,21,,,

Financial Manager , 21,,, 21,,, 221,,,

Quality manager , ,12,, ,12,, 2,1,,,

Human resources manager , ,122, ,122, 2,1,,,

Quality auditors 2 2,, ,1,,, ,11,,,

Accountant 2 2,, ,12,, 2,1,,,

Secretaries , ,2, ,2, 712,,

Human resources staff 2 2,, ,1,,, ,11,,,

security 2 22, 7,, ,,12,,

Indirect employes 14 123422 19,3422

Factory manager , ,12,, ,12,, 2,1,,,

Production line technicians ,, 22, 212,, ,,1,,,

Logistics Manager , ,122, ,122, 2,1,,,

Maintenance technicians 2 2,, 1,, ,11,,

Driver 2 22, ,172, 221,,,

Logistics staff 2 2,, ,1,,, ,11,,,

Direct emplyes 21 ,3922 1393922


35

Job Title No. Monthly salary (JD) Total monthly

salaries

Total annual wages )دينار(

Total 35 21,000 336,000

Depreciations

The following tables illustrate cost of Capex and Depreciaition rates:

Table 33 Capex and Depreciation Expenses

Equipment costs and capital expenditure, annual consumption rates Cost (JOD) Consumption ratio Annual additions

Land 221,,, ,.,% ,.,%

Construction Works 21,1,,2 2.,% ,.,%

Machinaries ,,11,2, ,,.,% 2.,%

Furniture ,,12,, ,,.,% 2.,%

Vehicles 221122, ,,.,% ,.,%

Gross Total (JOD) 99,395,

Table 34 Depreciations and Additions on Construction Works

Summary of capital costs and additions and consumption annually 221, 2219 2222 2221 2222 2223 2224 2225 2229 2229

Total Fixed Assets ,721722 ,221,12 ,,712,2 ,1,,712,2 ,1,,712,2 ,1,271222 ,1,271,72 ,1,,21172 ,1,2,1122 ,1,7,1227

Total Depreciation Expenses 7,122, 2,122, 2,12,, 221,72 221,71 2,1,,7 2212,2 2112,2 271,,7 221222

Total Accumulated Depreciation 7,122, ,2,127, 2,,177, 2221,22 ,,11,2, ,,,1221 2721212 11,127, 7,,1221 22712,,

Total Additions , ,12,, ,1221 ,17,2 ,1,71 ,,12,, ,,1,2, ,,11,7 ,,1,2, ,,12,,

Total Net Book Values 2,,1,22 2221,,2 721122, 12,12,, 1,,1,,, 22712,2 ,121,,, 22117,1 2,,12,, 2221,22


36

Loan

The table below summarizes all details related to the loan such as annual installments and payment methods for the remaining amount of the loan for each year of

the project.

Table 35 Loan Details

Loan value 135293223

Annual Interst Rate 9.48% Loans Period 5

Loan Starts at year: 2,,7

Annual Payment 2,21222

Number of Payments 5

The following table shows the loan payments:

year Annual Payment Interest Capital The remainder of the loan

2219 1,507,203 221, 392,328 142,883 249,446 1,257,757 2219 392,328 119,235 273,093 984,664 2222 392,328 93,346 298,982 685,682 2221 392,328 65,003 327,326 358,356 2222 392,328 33,972 358,356 0

Income Statement


37

Through all the information and financial analysis of the project's financial expenses have statment income for the years (2018 – 2027) as shown in the following

table:

Table 36 Income Statement

Description 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Revenues

Sales Revenues 212,11221 212,1121, 2172712,2 ,1,271,2, ,1,271,2, ,12221,,2 ,12221,,2 ,12,21,71 ,121,12,, 21,,,1,22

Gross Operating Revenues 212,11221 212,1121, 2172712,2 ,1,271,2, ,1,271,2, ,12221,,2 ,12221,,2 ,12,21,71 ,121,12,, 21,,,1,22

Operating Expenses (21212121,) (212211,17) (217,71,27) (21,221222) (21,,21222) (21,271,,,) (21,,,1122) (212271,21) (2122,17,7) (2172212,1)

Gross Operating Profit 22,1,72 ,1,17,7 ,1,,,1212 ,1,,,1112 ,1,,21117 ,1,,,1,,7 ,1,22122, ,121,1,2, ,122,1727 ,1,,71221

Gross Profit Percentage 27% 27% 27% 22% 27% 22% 27% 27% 22% 22%

Salaries and Benefits (Indirect Staff) (,,21,,,) (2,1122,) (2,21,,2) (22212,7) (2221,,,) (2,212,7) (2221,,,) (21212,2) (272112,) (22,1222)

General and Administraive Expenses (271,,2) (2,1,2,) (,,122,) (,,1,12) (,217,2) (,21,27) (,212,1) (,11112) (,21,12) (,,12,7)

Markeing Expenses (,1212,7) (,7212,2) (,2,127,) (2,212,1) (2,212,1) (2,11,22) (2,11,22) (22,1,,,) (2,21,72) (2271,,2)

Pre Operating Expenses (,21,22)

Gross Indirect Expenses (,,,11,2) (,2,1,2,) (,,,1121) (,121,72) (,7212,2) (2,21,21) (2,,122,) (22,1,27) (2121,1,) (2,,12,7)

Income before Interest, Depreciation and Tax ,1,122, 22,1222 2,2172, 12,1,,2 12,1,7, 1221,2, 11,11,, 7221,,2 77,12,7 222127,

Fixed Assets Depreciations (7,122,) (2,122,) (2,12,,) (221,72) (221,71) (2,1,,7) (2212,2) (2112,2) (271,,7) (221222)

Income before Tax and Interests 22,1,1, ,2,1,27 2,,1222 21,12,, 22,12,1 1,,122, 22,122, 1211,22 1271,,, 727122,

Bank Interests (,,21222) (,,,1222) (,212,1) (121,,2) (221,72) (,) (,) (,) (,) (,)

Income Before Tax 2,71,77 22,1222 ,2,1,2, 2,,12,2 2,11,22 1,,122, 22,122, 1211,22 1271,,, 727122,

Income Tax (,2122,) (,11,,2) (2,1,2,) (2212,1) (2212,1) (2,12,2) (2,12,2) (2,12,,) (2,122,) (211212)

Net Profit 22,1722 222122, ,,,1,2, ,7,1,,1 ,,,1,77 27,1,,2 2221,,, 1,,1272 122122, 7,,1,2,


38

Description 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Net Profit Percentage 7% ,% ,,% ,2% ,2% ,2% ,2% ,2% ,2% ,,%

Compulsory Reserves (221,72) (221221) (,,1,,2) (,71,,,) (,,1,,2) (271,,,) (2212,,) (1,1,27) (121222) (7,1,,2)

Retained Earnings 2,,122, 2,,122, 21,1,,, ,12,21,27 ,17221,,7 2122,172, 2172,121, 212,212,1 2122212,2 ,12,2127,

Expected Cashflows Statement

The table belwo summarizes project cashflows statement, where net cash flows are positive during all years as below

Table 37 Expected Cashflows

221, 2219 2222 2221 2222 2223 2224 2225 2229 2229

Cash Inflows from Operating Activities

Net Profit 22,1722 222122, ,,,1,2, ,7,1,,1 ,,,1,77 27,1,,2 2221,,, 1,,1272 122122, 7,,1,2,

Bank Interests ,,21222 ,,,1222 ,212,1 121,,2 221,72 , , , , ,

Depreciation 7,122, 2,122, 2,12,, 221,72 221,71 2,1,,7 2212,2 2112,2 271,,7 221222

Total Operating Cashflows before

Additions to Working Capital

,211,21 22212,2 27,117, 1211277 1,21222 122122, 1,,1222 1,,112, 7,,1227 72,1,,2

Inventory (Increase/Decrease) (,22121,) (,,1272) (,,1272) (,,1272) , (,,1272) , (,,1272) (,,1272) (,,1272)

Accounts Receviables (Increase/Decrease) (27,1222) (2212,,) (2212,,) (2212,,) , (2212,,) , (2212,,) (2212,,) (2212,,)

Accounts Paybales (Increase/Decrease) ,2212,2 ,2121, ,21,2, ,21,,, ,172, ,,1,2, ,12,7 ,,1222 ,,121, ,,1,,,

Working Capital (Increase/Decrease) (22,12,,) (,,1,21) (,,12,2) (,,1221) ,172, (,,1122) ,12,7 (,,1222) (,,1,22) (,,1217)


39

221, 2219 2222 2221 2222 2223 2224 2225 2229 2229

Net Cashflows from Operating Activities 2211122 2,212,, 22,1727 1,11,2, 1,,1,72 1221222 1,2127, 17,1,2, 72,1722 71,11,,

Cashflows from Investments Activities

Fixed Assets (Procurement) (,721722) (,12,,) (,1221) (,17,2) (,1,71) (,,12,,) (,,1,2,) (,,11,7) (,,1,2,) (,,12,,)

Net Cashflows from Investments Activities (,721722) (,12,,) (,1221) (,17,2) (,1,71) (,,12,,) (,,1,2,) (,,11,7) (,,1,2,) (,,12,,)

Cashflows from Financing Activities

Capital ,1,,,12,2

Loan Amortization (2,,1,,1) (2721,,2) (2,21,22) (2271221) (2221221) , , , , ,

Bank Interest Rate (,,21222) (,,,1222) (,212,1) (121,,2) (221,72) (,) (,) (,) (,) (,)

Loans ,12,712,2 , , , , , , , , ,

Net Cashflows from Financing Activities 21,,,1171 (2,21222) (2,21222) (2,21222) (2,21222) , , , , ,

Net (Increase/Decrease) in Cash ,127711,, ,,,172, ,221,22 2,,1272 2,7117, 12212,, 12,122, 11,1,22 7,,1222 7221,22

Cashflows at the Beginning of Period , ,127711,, ,1,721222 ,112,122, ,1222112, 21,,2122, 2117,1172 212,212,, 21,121,2, ,117217,2

Cashflows at the End of Period ,127711,, ,1,721222 ,112,122, ,1222112, 21,,2122, 2117,1172 212,212,, 21,121,2, ,117217,2 21,221221

Expected Balance Sheet

The balance sheet is one of the main statements which the project depends on, as it reflects the financial position of the entity and is usually estimated on the last

day of the financial year.

All financial information and analysis of the project shall be the estimated for the years (2018-2027) as shown in the table below:


40

Table 38 Expected Balance Sheet

Description 221, 2219 2222 2221 2222 2223 2224 2225 2229 2229

Assets

Current Assets

Cash 1,377,601 1,478,352 1,631,284 1,835,659 2,043,331 2,671,675 3,303,504 3,963,959 4,673,793 5,432,226

Inventory 135,264 146,536 157,808 169,080 169,080 180,352 180,352 191,624 202,896 214,168

Accounts Receivable 270,528 293,072 315,616 338,160 338,160 360,704 360,704 383,248 405,792 428,336

Total current Assets 1,783,393 1,917,960 2,104,708 2,342,899 2,550,571 3,212,731 3,844,560 4,538,831 5,282,481 6,074,730

Non Current Assets

Fixed Assets (net) 899,438 828,498 756,820 684,390 611,190 537,202 462,410 386,796 310,340 233,023

Total Non Current Assets 899,438 828,498 756,820 684,390 611,190 537,202 462,410 386,796 310,340 233,023

Total Assets 2,682,831 2,746,457 2,861,529 3,027,289 3,161,760 3,749,933 4,306,970 4,925,626 5,592,821 6,307,754

Liabilities

Current Liabilities

Paybles 185,548 199,409 213,333 227,323 229,073 243,204 245,101 259,384 273,749 288,197

Remaining amount of Loan 273,093 298,982 327,326 358,356 (0) (0) (0) (0) (0) 0

Total current Liabilities 458,641 498,391 540,659 585,679 229,073 243,204 245,101 259,384 273,749 288,197

Non Current Liabilities

Long Terms Loans 984,664 685,682 358,356 0 0 0 0 0 0 0

Total Long Term Liabilities 984,664 685,682 358,356 0 0 0 0 0 0 0

Total Liabilities 1,443,305 1,184,073 899,015 585,679 229,073 243,204 245,101 259,384 273,749 288,197


41

Description 221, 2219 2222 2221 2222 2223 2224 2225 2229 2229

Owners Equity

Shareholders Contributions 1,004,802 1,004,802 1,004,802 1,004,802 1,004,802 1,004,802 1,004,802 1,004,802 1,004,802 1,004,802

Statutory Reseve 23,472 55,758 95,771 143,681 192,789 250,193 305,707 366,144 431,427 501,475

Retained Profits 211,251 501,824 861,941 1,293,127 1,735,097 2,251,734 2,751,361 3,295,296 3,882,843 4,513,279

Total Equity 1,239,525 1,562,384 1,962,514 2,441,610 2,932,687 3,506,729 4,061,869 4,666,242 5,319,072 6,019,556

Total Liabilities and Equity 2,682,831 2,746,457 2,861,529 3,027,289 3,161,760 3,749,933 4,306,970 4,925,626 5,592,821 6,307,754

Feasibility Indicators

There are more than one method to calculate the discounted cash flow statement. However, in this study, WACC was used to calculate the discounted cash flows

and net investment value. The Company's financing structure is based on equity and loans, therefore the discounted rate should be adjusted according to WACC

based on the following assumptions, the following table illustrates the net expected free cash flow of the project:

Table 39 Free Net Cash flows Table

Net Cashflows Pre- Operating 2,,2 2,,, 2,2, 2,2, 2,22 2,22 2,2, 2,22 2,21 2,27 Final value

Net Free Cashflows (212,21,,2) 2,,17,7 ,,21,7, 2,2121, 2,117,2 1,,1,,, 12212,, 12,122, 11,1,22 7,,1222 7221,22 ,17,11,,,

Discount Factor ,.,, ,.7, ,.12 ,.27 ,.2, ,.,2 ,.,, ,.21 ,.22 ,.2, ,.21 ,.21

Net Present Value for Cash Flows (235123225) 199349, 31239,4 32,39,4 3213494 2923539 2523,44 2293921 2113991 2233229 193359, 235223942


42

Table below (40) illustrates payback period for the project, as it is one of the indicators which investors care about before taking the investment decision as they

need to know when the project will return the invested amount of money. Payback period definition is the total required period so that the project generates a total

money equal to the total invested capital expenditure, as investor is always looking to return the full invested amount of money at the earliest possible.

Table 40 Payback Period

Payback Period Pre- Operating 2,,2 2,,, 2,2, 2,2, 2,22 2,22 2,2, 2,22 2,21 2,27

Net Free Cashflows (212,21,,2) 2,,17,7 ,,21,7, 2,2121, 2,117,2 1,,1,,, 12212,, 12,122, 11,1,22 7,,1222 7221,22

Project Value Returned 212,21,,2 212121227 ,171,12,2 ,12221,,7 12712,2 2712,, (1,,1,,,) (,12221,2,) (,12,2122,) (211,212,,) (2121,1122)

Payback Period (Year) 2 , , , , , , , , , ,

Table 41 Financial Analysis Results

indicator Value

Weighted Average Cost of Capital (WACC) ,2.,2%

Net Present Value for Cashflows 21,,71122

Payback Period 2

Internal Rate of Return 21.,2%

Sensitivity Analysis

Sensitivity analysis is conducted to investigate the effects of changes in significant inputs of the financial analysis. This includes changes in revenues, total

investment costs, and operating costs.


43

Table 42 Sensitivity Analysis

Sensitivity Analysis Internal Rate of Return Payback Period WACC

Original Scenario 21.,2% 2 12.05% Revenues declined by 10% 22.,2% 2 12.05%

Operating Expenses Increased by 10% ,,.12% 2 12.05%

Conclusions and Recommendations

Based on the profitability analysis and considering that project inrernal rate of return is higher than WACC, it is concluded that the project is feasible as the net

present value for the project is positive 2,447,658 Jordan Dinars considering that the project provides 35 Job Opportunitites for the governorate residents.

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